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Prospects, Risks and Opportunities for Biofuels
The current drive for biofuels from crops could be a two edged sword, writes TheBioenergySite Senior Editor, Chris Harris.
In some respects they could reverse the trend in declining commodity prices, and this new source of demand could create opportunities.
However, according to the section Biofuels: Prospects Risks and Opportunities in the report The State of Food and Agriculture, the United Nations' Food and Agriculture Organisation warns that the mounting pressure to grow crops for biofuel could have an negative impact of high food prices on the poor and also on food security.
The report says that biofuels and the policies that have been introduced to support the production of biofuels have their implications beyond their effect on commodity prices.
The report says that higher energy costs have already had a direct and strong impact on agricultural production costs and food prices.
"The recent emergence of liquid biofuels based on agricultural crops as transport fuels has reasserted the linkages between energy and agricultural output markets," it says.
"Liquid biofuels have the potential to exert a significant effect on agricultural markets, but they are, and are likely to remain, a relatively small part of the overall energy market."
The report shows that the global energy demand is 11,400 million tonnes per year and biomass, which is the largest of the alternative energy resources accounts for just 10 per cent of this.
Total renewable energy sources represent about 13 per cent of the total primary energy supply.
The report goes on to show that the developing world, particularly in Africa and Asia, relies heavily on biomass for its fuel.
And liquid biofuels, which come from agricultural crops are just 1.9 per cent of total bioenergy.
Source - IEA 2007"In recent years, however, liquid biofuels have grown rapidly in terms of volume and of share of global demand for transport energy. The growth is projected to continue," the report says.
The report adds: "This new source of demand for agricultural commodities creates opportunities, but also risks, for the food and agriculture sectors.
"Indeed, the demand for biofuels could reverse the declining trend in real commodity prices that has depressed agricultural growth in much of the developing world over recent decades.
"As such, biofuels may offer an opportunity for developing countries - where 75 percent of the world's poor depend on agriculture for their livelihoods - to harness agricultural growth for broader rural development and poverty reduction."
It continues that any stronger link between agriculture and the demand for energy could bring about higher agricultural prices, output and gross domestic product. It could also boost energy access in rural and developing areas.
But conversely the greater demand the and higher food prices can be a threat to the food security of the world's poorest people, the FAO says.
Source - IEA 2007The FAO says that at present liquid biofuels cannot exist without subsidies, but costs could be reduced if yields are increased and the crops are farmed more intensively.
Most of the growth in biofuel production has been in the developed OECD countries - in particular the US and Europe. The exception is Brazil, which has developed economically sustainable fuel from sugar cane.
The reason the OECD countries moved towards biofuels was originally energy security and reducing greenhouse emissions. These concerns are not going away, but they are now starting to be questioned, the report says.
It warns that in 2006 support for the production of biodiesel and ethanol in OECD countries hit between $11 billion and $12 billion and these costs could escalate. The FAO says that only Brazilian sugar cane ethanol is economically competitive with fossil fuels without subsidy.
Source - IEA 2007The FAO adds that these subsidies have led to protectionism and a misallocation of resources at an international level.
The FAO also warns that the benefit to the reduction of greenhouse gases might not be as great as the proponents of biofuels from crops are propounding.
Recent research has shown that large-scale expansion of biofuel production could increase greenhouse gas emissions and impact the environment, land and water resources.
"As the implications of biofuel development for developing countries are scrutinized more closely, one emerging concern is the negative impact of high food prices - which are partly a result of increased competition from biofuels for agricultural output and resources - on poverty and food security," the report says.
"At the same time, increasing demand for biofuels may offer opportunities for farmers and rural communities in developing countries and thus contribute to rural development. However, their capacity to take advantage of these opportunities depends on the existence of an enabling environment."
Further extracts from the FAO's "The State of Food and Agriculture" report will be examined in future weeks on TheBioenergySite.
Further Reading
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October 2008
